Are Analysts Getting Doubtful on AMD Stock? Goldman and D.A. Davidson Forecast a Slower Path

Advanced Micro Devices AMD -2.20% ▼ is facing a rare moment of caution from some of the most influential voices on Wall Street. While the company has been a favorite for AI investors, a small group of prominent analysts is now raising red flags about its ability to keep up with the competition. The most notable shift came recently when James Schneider from Goldman Sachs GS -0.67% ▼ and Gil Luria from D.A. Davidson both reiterated “Hold” or “Neutral” ratings on the stock. While Schneider actually lifted his price target to $240, Luria kept his at $220, signaling that the stock might be reaching its limit for now.

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Goldman Sachs Raises the Target but Keeps the “Neutral”

James Schneider of Goldman Sachs recently updated his outlook on AMD, moving his price target from $210 to $240. While a higher target usually sounds like good news, Schneider chose to keep his “Neutral” rating. He noted that while AMD’s new partnership with Meta META -3.83% ▼ to power a massive 6-gigawatt AI network is “encouraging,” the company still faces an uphill battle. The analyst is concerned about “limited near-term operating leverage,” meaning AMD is spending a lot of money on research and development, which could eat into its profits in the coming months.

D.A. Davidson Warns that AMD Is Playing Catch-Up

Gil Luria of D.A. Davidson has been even more vocal about his doubts. He initiated coverage of AMD with a “Neutral” rating and a $220 target, arguing that the company is falling behind in the race for AI dominance. Luria’s main concern isn’t the chips themselves, but everything that goes around them. He wrote that AMD is “meaningfully lacking outside their core hardware capabilities,” specifically pointing to a lagging software stack and a reliance on third-party networking. According to Luria, customers want a complete ecosystem like the one Nvidia NVDA -1.58% ▼ provides.

Gil Calls AMD’s Problem a “Negative Flywheel”

Luria also highlighted a growing problem he calls a “negative flywheel.” Because Nvidia’s CUDA software is so entrenched in the industry, it is very hard for developers to switch to AMD. This makes big buyers like OpenAI or Microsoft MSFT -1.57% ▼ more hesitant to bet on AMD as their primary supplier. Furthermore, Luria noted that volume leaders like Nvidia often get better treatment from manufacturers like TSMC TSM +0.48% ▲ . If AMD can’t get enough chips made or can’t improve its software, it may remain a “secondary supplier” forever.

Key Takeaway

The latest forecast for AMD shows a split between those who believe in the hardware and those who worry about the software. Analysts like Schneider and Luria are staying cautious with “Hold” ratings because they believe AMD has too much work to do to catch up to Nvidia’s total package. While they have set price targets between $220 and $240, they are waiting to see if AMD can turn its impressive chip specs into real-world dominance before they recommend buying more shares.

Is AMD Stock a Good Buy?

Turning to TipRanks, the analysts’ consensus rating for AMD is Moderate Buy, based on 23 Buy and eight Hold ratings over the past three months. With that comes an average 12-month AMD stock price target of $286.04, representing a potential 47.9% upside for the shares.

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